Why a Startup Business Plan Is Still Worth Writing

10:07 PM

It used to be the case that every startup needed a business plan. Writing a plan was just a de fact...

It used to be the case that every startup needed a business plan.
Writing a plan was just a de facto part of the startup journey. Everyone
did it, usually in the early stages, no questions asked. Please consider us to read Basic Steps To Writing A Business Plan.

But recently the value of the business plan has been hotly debated
with some people arguing that they have become obsolete, irrelevant, and
basically a waste of time. Critics argue that entrepreneurs don’t know
enough, at least not in the early stages, about their market or their
users to be able to make reasonable assumptions about their proposed
business, and therefore the resulting business plans often are
unrealistic and are just filled with junk hypotheses.

The critics argue that entrepreneurs should, instead, focus their
time and energy on learning as much about their market as they can, for
example, by developing a minimum viable product and gathering feedback
from potential users.

I agree, to a certain extent, that business plans can be a waste of
time. There’s no doubt that they are time-consuming to write. And
sometimes, writing a business plan can become a “crutch” for aspiring
entrepreneurs. They get stuck in a loop where they revise, tweak, and
update the plan endlessly, all the while thinking that they’re “working
on their startup,” but in reality they never make the leap from
“planning” into “doing.”

I definitely do not advocate that. At some point, you have to stop
tweaking the business plan and just start the business. However, I do
think that there is value in spending a reasonable amount of time
writing a business plan and updating periodically as you learn more.
Here’s why:

1. It forces you to face the unpleasant realities of startup life.

Launching your startup will take (at least!) twice as much time and
money as you think it will. A key component of any business plan is
making financial projections. This entails hammering out all the
nitty-gritty details, for example, estimating how much money you need to
create a prototype, how much money you can actually expect to make in
early years, how much runway you have before will you need to
raise/borrow money, etc. Forcing yourself to put down numbers (even if
it’s just a range of values) can be hard, but it’s extremely helpful,
because it forces you to face the harsh reality of what needs to happen
for your startup to be successful.

2. It forces you to deal with those “I’ll think about this later” problems.

There are a million and one things that you need to do when launching
a startup. All too often, it’s easy to put off some of the less-fun,
less-glamorous tasks. But writing a business plan forces you to spend at
least a little bit of time reflecting on ALL the aspects of your
proposed business, including the problems that you said “you’ll think
about later.”

And this is important. You don’t want to find out later that Google
Adwords which you were banking on for your online marketing campaign is
actually 10x what you can afford, or that potential partners are
expecting a significantly higher share of profits than you were planning
to give them. Writing a business plan forces you to do a little bit of
initial research across all potential aspects of the business. This
leads to a more grounded understanding of the challenges that you’ll
face as you launch your startup.

3. It makes sure that you and your co-founders are aligned in your expectations.It’s also important that you and your co-founders share a common
vision for your startup. You don’t want to be in a situation where one
person wants to create a lifestyle company, where the goal is to grow
the business slowly, while the other person wants to raise VC money
immediately and take a go-big-or-go-home approach. If there’s any
disagreement, you’ll want to address those concerns ASAP. Writing a
business plan, where you’re forced to spell out your vision for the
business in a very concrete way, can be a great way to facilitate this
conversation.

Those are just some ideas I had about why writing a business plan is
still worth doing, as long as you don’t let yourself get stuck in the
trap of continually planning your startup but never actually launching
it.Thoughts? Let me know! Consider to comment below.